U.S. Steel convertibles jump outright, add on hedge after earnings; EZCorp also adds

By Rebecca Melvin

New York, July 30 – U.S. convertibles trading picked up later Wednesday after a mostly quiet start with some gray market action in Tyson Foods Inc.’s planned $1.5 billion of tangible equity units, which was expected to price after the market close, a New York-based trader said.

The Tyson equity units, which have a $50 par, were seen trading at plus 0.5 bid, 1.0 offered, the trader said.

After the market close, there was more new issue action as Qihoo 360 Technology Co. Ltd. launched a Rule 144A and Regulation S offering of $900 million of convertible senior notes in two tranches.

Back in established issues, the 2.75% convertibles of United States Steel Corp. were in focus, and they surged on an outright basis and added on a dollar-neutral, or hedged, basis. The move came after the Pittsburgh-based steelmaker reported a narrower second-quarter loss and said that operating income for all of the company’s businesses is expected to increase significantly in the third quarter compared to the second quarter.

EZCorp Inc.’s 2.125% convertibles were also better by about 0.5 point on a dollar-neutral basis after the Austin, Texas-based pawn store operator reported earnings that missed estimates by 2 cents but revenue that was in line with guidance. The company also reaffirmed current earnings per share guidance.

The EZCorp 2.125% convertibles due 2019 were quoted at 91.25 bid, 92.25 offered with the underlying shares at $10.04.

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